As development finance leaders converge on Sevilla for the Fourth International Conference on Financing for Development (FfD4), one term is on everyone’s minds: blended finance. In the decade since the Addis Ababa Action Agenda (AAAA) elevated public–private financing partnerships, blended finance has been hailed as a linchpin to mobilize billions for the Sustainable Development Goals (SDGs). Yet in today’s volatile capital environment, facing a breakdown in multilateralism and development assistance, an incomplete reform of the international finance architecture, and an accelerating climate crisis, the promise of blended finance remains only partially fulfilled.

The recently launched Compromiso de Sevilla—the FfD4 outcome document—reflects renewed momentum to harness blended finance’s early potential and position it more firmly as an engine of impact. Realizing that vision, however, will require sharpening our tools, learning from past missteps, and making bold changes in how we blend capital for development.

Over the past decade, several barriers have prevented blended finance from reaching its full potential: a lack of risk taking from private players, a pattern of bespoke deal structuring and starting afresh, an optimization of “getting the deal done” over ensuring impact through the deal, and an underutilization of existing pools of catalytic capital.

To move past these challenges, the development finance community must rally around four key priorities coming out of FfD4. We will need to work together to align incentives and share risk, scale what works via standardization, embed measurable impact into structuring processes, and deploy catalytic capital where it unlocks markets and empowers local institutions.

We were present in Addis in 2015 and will also be shaping the agenda at the Forum in Sevilla next week. Building on lessons from co-designing and launching Convergence, the global blended finance network, in 2016, Dalberg has since supported dozens of blended initiatives—from undertaking facility design and pipeline building mandates to shaping the institutional strategy on blended finance for leading development finance institutions (DFIs) and private capital allocators. We’ve seen what works, what stalls, and where the real breakthroughs happen. Normally, this is when incentives, institutions, and ideas are aligned around a long-term vision for change. In this article, we share insights and a roadmap for change that we hope can help take us there.

From Addis to Sevilla: High Hopes, Modest Results

Back in 2015, the AAAA enshrined blended finance as the key strategy to unlock more private sector capital to fill the SDG financing gap. It defined blended finance as concessional public finance that could lower investment-specific risks and incentivize additional private sector capital and expertise, typically through vehicles like public–private partnerships (PPPs). The AAAA’s tone was optimistic yet cautious: it urged that projects “share risks and reward fairly,” include accountability mechanisms, and meet social and environmental standards.

Fast forward to 2025, and the results have been mixed. Efforts by the Convergence network, its members and others have spurred billions of dollars in blended finance solutions and helped shape a robust market. The market saw 123 blended deals close in 2024, totaling $18 billion—a volume above the five-year average (Convergence, State of Blended Finance 2025). Deal sizes are growing and, importantly, private investors deployed $6.9 billion in 2024, outpacing DFIs and multilateral development banks (MDBs) for the first time.

Despite this promising progress, blended finance remains far from achieving its potential to close the $4 trillion SDG financing gap over the past decade, and a reset is needed. FfD4 arrives amid greater urgency, wider experience, and frankly, some disillusionment. If Addis Ababa was the conceptual launch of blended finance, Sevilla must be its reboot. The Compromiso de Sevilla reflects this changed context in how it frames blended finance, both explicitly and implicitly, compared to the AAAA a decade ago.

From Agenda to Commitment: How Sevilla Reframes Blended Finance

To understand the leap from AAAA to the Sevilla Commitment, it’s instructive to see them side by side. The table below highlights how the global consensus on blended finance has evolved between 2015 and 2025 (Sources: Dalberg analysis; Addis Ababa Action Agenda; Final Draft of Compromiso de Sevilla):

In essence, the Sevilla Commitment “mainstreams” blended finance, not as a silver bullet, but as a sophisticated set of practices that need to be scaled up and done right. It addresses head-on many issues that practitioners have flagged over the past 10 years. For example, where AAAA was largely silent on the quality of impact, Sevilla explicitly demands blended finance focus on sustainable development results, not just high leverage ratios. It stresses country ownership and additionality (blended funds should bring development outcomes that wouldn’t otherwise occur), making clear that blending is a means to an end, not an end in itself. The document also responds to concerns about transparency and learning by pushing for data sharing on how blended deals perform, which can help address the field’s reputation for hype over evidence.

Crucially, the Sevilla outcome nudges institutions to operationalize these guidelines. It calls on MDBs and DFIs to support early-stage project finance and create catalytic capital pools seeded by public/philanthropic money that can quickly de-risk portfolios of investments, rather than scrambling deal by deal. There’s also a notable endorsement of expanding guarantees, insurance, and other risk-sharing tools, and a plea to regulators and credit rating agencies: adjust your frameworks so these risk mitigants are recognized and not disincentivized.

The contrast is stark. In 2015, the international community was saying, “Yes, let’s try blending, carefully.” In 2025, it’s saying, “We need blended finance to work better, bigger, and for the right goals—and here’s how we start doing it.” Sevilla is a call to action born of both frustration and optimism: frustration that the past decade’s incrementalism hasn’t delivered enough and optimism that, by applying lessons learned, we can unlock far more capital for good.

From Rhetoric to Action: Making Blended Finance Truly Catalytic

Commitments have been made, and momentum is real—now delivery must follow. To capitalize on this momentum, all of us in the development finance community must rally around the priorities coming out of FfD4:

Align Incentives and Share Risk

To close the funding gap and reach the Sevilla agreement mobilization goals, we need to unlock more private investment. However, concessional funds have tended to mobilize other public or quasi-public capital from MDBs/DFIs (i.e., other public institutions), not independent private actors. We have an opportunity to shift away from shielding private actors, to creating true risk-sharing structures. FfD4 calls for innovative instruments—such as equity-like investments, state-contingent subsidies, and auctioned incentives—that balance returns and responsibilities. This includes FX hedging solutions and regulatory reforms that properly value guarantees. Rather than being a buffer, philanthropy should be part of engineered catalytic pools that attract private finance without absorbing all downside.

Scale What Works and Standardize Structures to Scale Blended Finance Efficiently

Reaching these mobilization goals will also require more easily replicated template approaches and term sheets that investors can understand at a glance. In the last 10 years, the structuring toolkit has not evolved quickly enough, resulting in poorly optimized blended deals. Most transactions remain bespoke, complex, and slow. As a result, even when deals succeed financially, they are rarely scalable or efficient. The FfD4 agenda promotes pooled catalytic capital facilities and common access frameworks, especially for MDBs/DFIs, to streamline participation. More standardized templates, term sheets, and co-investment vehicles, paired with clear guidelines on debt sustainability and national alignment can make blended finance faster, repeatable, and scalable (such that arranging a $100 million impact investment isn’t an odyssey each time).

Prioritize Measurable Impact

Many large-scale blended deals over the past decade have failed to meet their impact goals, with incentives skewed toward deal volume over impact. Without linking subsidies to SMART impact targets, there’s little accountability. Consider the evidence from the “big end” of the market: a Dalberg analysis of 39 large-scale blended transactions (each over $1 billion) revealed that over 30% of these mega-deals failed to meet their impact targets. In other words, even when we manage to “blend billions,” we’re not necessarily delivering the impact promised. Metrics for blended finance success must evolve beyond deal volume and leverage ratios. The enhanced principles for impact under FfD4 emphasize development additionality, alignment with local priorities, SMART targets, and transparent reporting of mobilization ratios, financial performance, and impact data. Recent Dalberg analysis of IDB Invest’s blended finance portfolio shows the spillover value of introducing impact incentives into deal terms. Embedding mechanisms like performance-based tranches, outcome payments, and revenue-linked terms ensures financing is contingent on verified results—not just capital movement. Every blended finance program should track and publicly report its mobilization ratios and development results. Data aggregated by Convergence can consolidate learnings, track performance, and inform adaptive improvement across the ecosystem. This includes cases where mobilization is zero or impact falls short – there are invaluable lessons for the community and wider ecosystem from a transparent, evidence-driven blended finance ecosystem.

Deploy Catalytic Capital Where it Unlocks Markets Empowers Local Institutions

Blended finance is most effective when it targets market failures—areas where private capital typically won’t go. To unlock markets, we need to deploy concessional capital more strategically. Philanthropic capital, despite its unique ability to fund early-stage prep, build local capacity, and support high-risk, high-impact solutions, contributed less than 3% of total blended finance in 2024 and is too often used to patch gaps instead of driving systemic change. We recently co-hosted a blended finance roundtable as part of DC Climate Week with leading philanthropic actors; the discussion made clear that foundations can play a unique role within and outside the capital stack, embedding core values and a long-term vision that aren’t always embedded from the start. Local stakeholder participation is also essential: national development banks and local investors should be co-designers and co-investors, not just recipients. Deals rooted in local ownership—with country-led priorities and community input—are more likely to deliver long-term, equitable outcomes. That means capitalizing local banks, supporting them as key actors (as emphasized in the outcome document), and involving local investors who understand their markets. Community engagement isn’t symbolic—it reveals risks and opportunities outsiders might miss. Ultimately, blended finance should build self-sustaining local financial ecosystems, not become a permanent fixture.

These recommendations are not easy fixes; they require a shift in mindset for many funders and investors. But they are achievable. In fact, most are already underway in pockets: we see DFIs starting to experiment with impact-linked loans; foundations collaborating on pre-development grant facilities; the Global Emerging Markets Risk Database expanding data on defaults in low-income markets. What’s needed now is the scale and urgency that a global political mandate can provide. Sevilla’s Compromiso gives that mandate: it is a clarion call to all of us in the development finance field to get serious about catalytic blended finance.

A New Chapter for Blended Finance

Blended finance was never meant to be a panacea. It is one tool among many in the sustainable development finance toolkit—one in which Dalberg has been a trusted partner since its inception. Over the past decade, we have seen what works, and doesn’t, in blended finance. So we know that FfD4 in Sevilla is more than a diplomatic milestone. A decade on from Addis, we see that “how we blend” matters just as much as “how much.” We see that there is a political and technical reset—a rare opportunity to define what it means to finance development well, in an era of compounding shocks and shifting power. If public funds are used merely to check a box, we should expect and accept limited results and rightful skepticism. But when blending addresses real market failures, centers development outcomes, and aligns incentives across stakeholders, it can unlock transformative capital flows where they are most urgently needed.

The building blocks are in place: a clearer global agenda, stronger principles, a more honest evidence base—all we need now is a new generation of actors ready to lead.